Lot of investors might be wondering that why are the stocks, which are value bets and that have not risen so sharply are also falling. Not only falling sharply but relentlessly. The markets gained quite well post 2014 anticipating strong earnings growth.
Actually the earning growth in last five to six years have not grown even 10% on Nifty. So that is less than 2% per annum. FII’s bet heavily on the markets anticipating strong earning growth and they were waiting and waiting since last five years for earnings growth. They got it all wrong in many cases and now that the downcycle has begun, all hopes have got dashed.
These FIIs have invested on a concentrated basis in a few heavyweight stocks and are concentrating all their energy on some of these stocks. For that concentration, they might also have sold off lot of other good quality stocks.
Some of the good quality stocks in PSU space are also falling not because of weak funadamentals but because of relentless supply of paper from Government of India. Stick to good quality stocks with growth history and also good value. Even if some of these stocks do not perform in this cycle, it might perform in the next cycle.
Also concentrate on top 100-200 stocks and also stocks with good dividend yield and good value. The wait may be longer and hence good dividends will help investors survive in bad times provided those businesses are stable.